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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2006

For the transition period from              to             

Commission file number 1-15991

AIRTRAN HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

9955 AirTran Boulevard

Orlando, Florida 32827

(Address, including zip code, of registrant’s principal executive offices)

(407) 318-5600

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.001 par value

(Title of class)

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer    x    Accelerated filer  ¨    Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The aggregate market value of common stock held by non-affiliates of the registrant as of February 16, 2007, was approximately $1,044,000,000 (based on the last reported sale price on the New York Stock Exchange on that date). The number of shares outstanding of the registrant’s common stock as of February 16, 2007 was 91,332,760 shares.

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DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement, to be used in connection with the solicitation of proxies to be voted at the registrant's annual meeting of stockholders to be held on May 23, 2007 and to be filed with the Commission, are incorporated by reference into this Report on Form 10-K.

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FORWARD-LOOKING INFORMATION

Statements in this Form 10-K report (or otherwise made by AirTran or on AirTran’s behalf) contain various forward-looking statements, including, except in connection with AirTran’s offer to exchange with respect to Midwest Air Group, Inc (“Midwest”), within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which represent our management’s beliefs and assumptions concerning future events. When used in this document and in documents incorporated by reference, forward-looking statements include, without limitation, statements regarding financial forecasts or projections, our expectations, beliefs, intentions or future strategies that are signified by the words “expects”, “anticipates”, “intends”, “believes” or similar language. These forward-looking statements are subject to risks, uncertainties and assumptions that could cause our actual results and the timing of certain events to differ materially from those expressed in the forward-looking statements. All forward-looking statements included in this report are based on information available to us on the date of this report. It is routine for our internal projections and expectations to change as the year or each quarter in the year progress, and therefore it should be clearly understood that the internal projections, beliefs and assumptions upon which we base our expectations may change. Although these expectations may change, we may not inform you if they do, except as required by law. Our policy is generally to provide our expectations only once per quarter, and not to update that information until the next quarter.

You should understand that many important factors, in addition to those discussed in this report, could cause our results to differ materially from those expressed in the forward-looking statements. Potential factors that could affect our results include, in addition to others not described in this report, those described in Item 1A of our report on Form 10-K under “Risk Factors”. In light of these risks and uncertainties, the forward-looking events discussed in this report might not occur.

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PART I

The Company

All of the operations of AirTran Holdings, Inc. (the Company, AirTran, we or us) are conducted by our wholly-owned subsidiary, AirTran Airways, Inc. (AirTran Airways or Airways). AirTran Airways is one of the largest low cost scheduled airlines in the United States in terms of departures and seats offered. We operate scheduled airline service primarily in short-haul markets principally in the eastern United States, with a majority of our flights originating and terminating at our hub in Atlanta, Georgia. As of February 1, 2007, we operated 87 Boeing 717-200 (B717) and 41 Boeing 737-700 (B737) aircraft offering approximately 700 scheduled flights per day to 51 locations in United States as well as to Freeport, Grand Bahamas.

We have created what we believe to be a successful business model by targeting value oriented business and leisure travelers with high quality service at affordable fares. Our service is designed not only to satisfy the transportation needs of our target customers, but also to provide customers with a travel experience worth repeating. The success of this strategy is evidenced by the 20.1 million revenue passengers who flew AirTran Airways during 2006, a 20.5 percent increase from the 16.6 million revenue passengers we served in the prior year. We achieved these results with a cost structure that ranks among the lowest in the airline industry.

Our principal executive offices are located at 9955 AirTran Boulevard, Orlando, Florida 32827, and our telephone number is (407) 318-5600. Our official website address is www.airtran.com. Our audit committee charter, code of conduct and ethics, and filings with the U.S. Securities and Exchange Commission, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports, are accessible free of charge at www.airtran.com. Any waiver of the terms of our code of conduct and ethics for the chief executive officer, the chief financial officer, any accounting officer and all other executive officers will be disclosed on our website. During 2006, we posted in a timely manner all Exchange Act reports required to be filed during the period.

The reference to our website does not constitute incorporation by reference of any information contained at that site.

Proposed Acquisition of Midwest Air Group

We believe that a combination of AirTran Airways and Midwest Air Group (Midwest) would provide substantial benefits to the shareholders, customers, employees and other stakeholders of the two companies. On January 11, 2007, we commenced an exchange offer for all of the outstanding shares of Midwest, for $13.25 per Midwest share, based on the closing price of our common stock on January 8, 2007. The offer consists of $6.625 in cash and 0.5884 share of AirTran common stock for each Midwest share. The total equity value of the exchange offer is approximately $345 million. The offer, which is being made through a wholly-owned subsidiary of the Company, has been extended and is scheduled to expire on March 8, 2007. The exchange offer is subject to specified and customary conditions. On January 25, 2007, the board of directors of Midwest announced that it had unanimously recommended that Midwest's shareholders reject our offer to acquire all outstanding shares of Midwest and not tender their shares to us. Because we believe a combination of the two airlines would strengthen both airlines, we are continuing to pursue the acquisition of Midwest. We have filed a registration statement (Form S-4 No. 333-139917) with the Securities and Exchange Commission which contains additional information regarding the exchange offer and the benefits and risks related to the proposed acquisition.

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Business Strategy

Quality Low Fare Service. We established our competitive position by providing affordable fares that appeal to price conscious travelers. We have grown our business through innovative product offerings designed to enhance the entire airline travel experience of our customers while maintaining affordable fares. The AirTran experience features:

Through the AirTran experience, we have created an air travel product with broad appeal which generates a growing number of repeat customers.

We believe our comparatively low-cost structure will enable us to continue our existing successful strategies, expand our network, provide us with opportunities to further enhance the AirTran experience in innovative ways and stimulate increased demand for air travel from existing and new customers.

New and Modern Fleet. Our entire fleet is comprised of B717 and B737 aircraft. We were the launch customer for the B717, which was designed specifically for efficient short-haul service. As of February 1, 2007, our fleet included 87 B717 aircraft. We believe the B717 remains ideally suited for the short-haul, high-frequency service that we primarily operate and provides operating efficiencies which support our low cost structure. The manufacturer of the B717 discontinued the production of the aircraft in 2006.

We took delivery of our first B737-700 aircraft in June 2004 and, as of February 1, 2007, our fleet included 41 B737 aircraft. In addition to the 41 B737 aircraft, we hold firm orders for 59 B737 aircraft to be delivered through 2011. We believe the B737 is an ideal complement to our B717 aircraft, offering us a larger aircraft, increased range and even lower unit operating cost per available seat mile flown. The B737 aircraft has allowed us to extend our network to selected cities in the western United States and offers us the ability to expand our international operations to locations in Canada, Mexico, Central America and the Caribbean should we chose to do so. We believe the B737 aircraft enhances the AirTran brand while offering improvements in our operating performance.

We had a combined total of 128 aircraft on February 1, 2007, giving us an average fleet age among the lowest in the industry at approximately three years.

Growing Atlanta Hub and Expanding Network System. As the second largest carrier at Hartsfield –Jackson Atlanta International Airport, the world’s busiest airport, we have a strong presence in Atlanta. The Metropolitan Atlanta population base represents one of the largest travel markets in the United States and its geographic position provides a strong hub from which we continue to expand our route network. In 2006, we increased service to a number of existing locations and added two new cities, Seattle, Washington and White Plains, New York. In the fourth quarter of 2006, we announced service to three new locations; Newburgh, New York; Daytona Beach, Florida; and Phoenix, Arizona, which commenced in the first quarter of 2007. In January 2007 we announced service to two additional new locations, San Diego, California and St. Louis, Missouri, which will commence in the second quarter of 2007.

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We believe that there are a number of markets in the United States that are underserved or overpriced by major airlines that present opportunities for expanding our quality low fare service. As a result, we intend to grow our network by increasing the number of flights in markets we currently serve, by adding new routes between cities already in our system and service to new cities as opportunities arise. Expansion of our network allows us to build upon our existing infrastructure, which should reduce unit costs and improve productivity and aircraft utilization.

Diversification of Route Network. Since 2000, we have expanded the scope of our route structure to include coast to coast flying and have increased the number of flights both from our Atlanta hub as well as other airports. We have diversified our route structure by increasing the amount of non-Atlanta related operations from approximately 10 percent of our daily departures as of December 31, 2001 to approximately 34 percent of daily operations in January 2007 (see table below). For example, our expansion at Baltimore/Washington International Airport enabled us to initiate many new non-stop routes. In the future, we may selectively add new “point-to-point” routes between cities other than Atlanta that we currently serve, as well as create additional hubs or additional “focus” cities similar to our operations at Baltimore/Washington and Orlando.

* Operations is defined as a take-off and landing at each city; percentage of system operations will be greater than 100%

Increase Sales Through Our Website. We utilize the Internet as an integral part of our distribution network and emphasize our website, www.airtran.com, prominently in all of our marketing. Sales booked directly on airtran.com represent our most cost-effective form of distribution. In addition to being user-friendly and simple, our website is designed to sell tickets efficiently. We continue to add functionality to airtran.com that allows customers to easily book and manage their travel including a new fare and schedule display, the ability to retrieve and change future flight reservations and seat selection and on-line check-in. The airtran.com website is an important distribution channel, producing 60% of our revenues during 2006.

Seasonality

Our financial and operating results for any interim period are not necessarily indicative of those for the entire year. Air travel in our markets tends to be seasonal, with the highest levels occurring during the winter months to Florida and the summer months to the northeastern and western United States. Advertising and promotional expenses may be greater in lower traffic periods, as well as when entering a new market, as we seek to stimulate demand and promote the AirTran Airways brand.

Competitive Strengths

Low Cost Structure. Our cost structure ranks among the lowest in the domestic airline industry in terms of cost per available seat mile, providing a competitive advantage compared to higher cost carriers. Our low operating costs are made possible through a company-wide focus on cost controls with emphasis on high labor productivity, lower distribution cost and, higher asset utilization. In addition, we realize efficiencies from the operation of only two aircraft types from a single manufacturer as well as enhanced efficiencies from the introduction of new modern B737 aircraft to our fleet.

Attractive Atlanta Hub and Route Network. We operate 22 gates from a single concourse under long-term leases at Hartsfield-Jackson Atlanta International Airport, the world’s busiest airport, and have use agreements for additional gates on an adjacent concourse and potential for expansion. With our 2006 expansion to Seattle and White Plains, and our 2007 expansion to Newburg, N.Y., San Diego, St. Louis and Phoenix, we now offer quality low fare service to 53 destinations from Atlanta, including most of the largest travel markets within the United States.

Diversified Traffic Base. We serve both the leisure and business traveler and continue to see strong demand for our product. Our revenue base grew by more than 39 percent in 2005 and more than 31 percent in 2006. Over the past four years, we have also diversified our network increasing operations in key business markets like Baltimore/Washington (BWI), Chicago-Midway (MDW)

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and Indianapolis (IND), as well as adding a number of new direct routes from Florida. As a percentage of total operations, Atlanta represents approximately 66 percent of our network, down from approximately 90 percent at the end of 2001. This market diversification provides a number of marketing and cost synergies and adds stability to our revenues by protecting against risks that may impact individual markets.

Flexibility. We have consistently demonstrated our ability to adjust to changes in the economy, market conditions and a competitive industry environment. We responded rapidly to the effects on our business from the September 11, 2001 terrorist attacks by reducing capacity approximately 20 percent. Working with our labor groups, we quickly reached agreement on a variety of temporary cost reduction measures, including both pay and work rule changes, which reduced our costs consistent with capacity. By retaining our workforce we were able to quickly respond to market opportunities and expand service to a number of new markets including Florida to points throughout our network. The ability to move quickly to meet the changing market was demonstrated with our 2001 expansion into BWI and more recently with our announcement of expanded service to/from Westchester County Airport in White Plains, N.Y, following the demise of Independence Air, as well as expansion to Stewart International Airport in Newburg, New York, Daytona Beach International Airport, and Phoenix Sky Harbor International Airport. In the upcoming months we will also initiate service to St. Louis and San Diego from out Atlanta hub.

Innovative Marketing. Our marketing efforts target both business and leisure travelers. We have developed a number of unique and innovative programs designed to stimulate demand for travel, create customer loyalty, highlight our unique product attributes, like affordable Business Class, and target both business and leisure travelers. Our popular leisure programs include Net Escapes Internet specials and newly branded AirTran U student travel program. Our A2B Corporate Program and Event Savers Meeting & Convention Program effectively attract and retain business customers.

A+ Rewards. Our A+ Rewards frequent flyer program offers a number of ways to earn free travel including the use of the AirTran VISA card, Hertz car rentals and bonus earnings for business class travel. We believe this program creates strong brand loyalty and provides opportunities for incremental revenue through credit sales and partnerships.

In November 2006, we announced that we teamed up with Frontier Airlines to create a landmark low cost carrier referral and marketing relationship that enables passengers to earn frequent flyer rewards in both airlines through AirTran Airways' A+ Rewards program and Frontier's EarlyReturns(R) program. In this exclusive relationship, both airlines include an integrated route map and full list of destination options on their web pages, doubling the destinations available to our customers. This integrated model between two of the leading U.S.-based low cost carriers offers travelers the ability to reach more than 100 destinations across four countries with low fares, aboard two of the youngest fleets in the industry.

The agreement between AirTran Airways and Frontier consists of three key components:

Competition

The airline industry is highly competitive. Airlines compete on the basis of markets served, price, schedule (frequency and flight times), quality of service, amenities, frequent flyer programs and other services. We compete with other airlines primarily on the basis of price, which is made possible by our low cost structure relative to other airlines and by focusing on selected markets across the United States. We may face greater competition from existing or new carriers in the future that could negatively impact our financial and operating results.

Competitors with greater liquidity and access to capital may price their fares at or below our fares or increase the frequency of their service. This competition could prevent us from attaining a share of the passenger traffic necessary to sustain profitable operations. Our ability to meet price competition is dependant on operating with costs equal to or lower than our competitors or potential competitors.

We believe that our competitive strengths are our low cost structure, friendly service, competitive fares and strong route network anchored by our hub at Hartsfield-Jackson Atlanta International Airport. Our growing brand and our presence in Baltimore/Washington, Chicago and a number of Florida markets augment operations from our Atlanta hub and provide us with a strong and defensible route system.

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Fares, Route System and Scheduling

The majority of markets we currently serve are located in the eastern United States. These markets are attractive due to the concentration of major population centers within relatively short distances from Atlanta, Baltimore/Washington and Florida, the historically high airfares charged by our competitors in these markets and the significant number of both current and potential business and leisure customers.

As of February 2007, we serve or have announced service to 53 cities from Atlanta, 24 from Orlando, and 10 from Baltimore/Washington. Our schedules are designed to provide convenient nonstop service and connections for our business and leisure travelers to our hubs and focus cities and to facilitate connections for our passengers traveling through our hubs and focus cities. Our network strength in Atlanta provides a strong base of local and connecting traffic as we expand the hub and increase the range and scope of the markets we serve.

We offer an easy to understand fare structure with a variety of fares at differing advance purchase intervals of fourteen days, seven days, and three days as well as “walk-up” fares. We manage the availability of seats at each fare level by day of week and by flight to maximize revenue. All of our fares are one-way and most tickets are nonrefundable but can be changed prior to departure with a service charge. Our fares never require a round trip purchase or a minimum stay (e.g., Saturday night stay). Our fare offerings are in direct contrast to prevalent pricing policies in the industry which typically feature many different price offerings and restrictions for seats on any one flight. We have established interline ticketing and baggage agreements with United Airlines, US Airways, Frontier Airlines, Midwest Airlines, Icelandair, Aer Lingus and British Airways which can increase our revenue opportunities and assist us with accommodating passengers during irregular operations.

In the future, we may add new markets to our existing routes and/or additional service between cities that are already served by us. If necessary, we may exit unprofitable routes. Our selection of markets depends on a number of factors existing at the time we consider service. In our city selection process, we evaluate the market demographics, the potential for service diversification, the ability to stimulate air travel and various competitive factors. Consequently, there can be no assurance that we will continue to provide service to all of the markets we currently serve.

Distribution, Marketing and e-Commerce

Our marketing efforts are focused on price-sensitive business travelers and leisure travelers, who are vital to our success, as we seek to position our product and stimulate new customer demand. These are the market segments in which consumers seek value and which we believe offer the greatest opportunity for growing our revenue base.

The primary objective of our marketing activities is to develop an innovative brand identity that is visibly unique and easily contrasted with our competitors. We communicate regularly and frequently with existing and potential customers through the use of advertisements in newspapers, radio, television, billboards, direct mail, e-mail, movie theatres and the Internet, as well as public relations efforts. These communications typically feature our destinations, quality of product such as business class, XM radio, our young all Boeing aircraft fleet and assigned seating, everyday affordable fares and special sales promotions. We promote the use of our airtran.com website.

Customers may book flights with us through our website, other Internet websites, travel agencies booking via global distribution systems (GDS) and our own reservation call centers. The Internet is our primary distribution channel, and during 2006, it represented more than 58 percent of our total bookings. Our Internet sales reflect both bookings made directly through airtran.com, as well as sales transacted through third-party websites such as Travelocity.com and Orbitz.com. Traditional travel agencies represented approximately 25 percent of our bookings while our reservation call centers generated the remainder.

Our award-winning website is a recognized leader in the field of airline e-commerce. Passengers can select their seats, check-in and print their own boarding passes, purchase trip insurance, and book hotel accommodations and car rentals with Hertz.com. Our Bye-Pass self service kiosks facilitate check-ins at the airport and provide our customers with an additional opportunity to purchase business class upgrades. Over half of our customers now check-in using airtran.com or Bye-Pass self-service kiosks.

During the fourth quarter of 2006, we implemented a new convenience fee for bookings made using our internal call centers. We believe this fee is consistent with other booking channels that provide interactive travel assistance, namely travel agents, and has had no discernible impact on overall demand at call centers. We also introduced the Bill-Me-Later payment option for call center and online bookings at airtran.com. This option will provide even greater convenience to our customers and help reduce our distribution costs going forward.

We offer our customers an affordable business class product. The business class cabin is configured with 2 by 2 oversized seats with more leg and seat room than the typical coach cabin. Our business class is currently available for $40-$80 over the full coach fare on a confirmed basis and for certain other fares on a walk-up, standby basis. Members of our A2B Corporate program and Elite members in our A+ Rewards program receive complimentary business class upgrades when purchasing certain fares.

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In contrast to other low cost airlines, we offer our customers the ability to select seats in advance. Full fare passengers, A+ Reward Elite members and members of our A2B Corporate travel program, many of whom tend to purchase tickets at the last minute, are allowed to reserve seats at the time of purchase. All other customers may reserve seats at the time they check-in, either at the airport or online at airtran.com.

We also offer our automated frequent flier program known as “A+ Rewards.” Our customers may earn either free roundtrip travel or business class upgrades on AirTran Airways, or under certain circumstances, free travel on other airlines. A+ Rewards credits can also be earned for purchases made with an AirTran Airways A+ Visa card, when renting from Hertz, other A+ Rewards partners and in conjunction with marketing promotions that we may run from time to time.

We perform all of our marketing, promotional and media relations in-house and utilize an outside firm for advertising and public relations.

Computer Reservations

We are a participant in the major travel agency GDSs, including Amadeus, Galileo, SABRE, and WorldSpan. These systems provide flight schedules and pricing information and allow travel agents to electronically book a flight reservation without contacting our reservations facility. We pay booking fees for the completed transactions made in the GDS systems.

For direct reservations, either through our call centers or airtran.com, we provide our customers with a confirmation number, similar to the systems used by hotels and car rental agencies. At the airport this information is used for customer check-in either at the ticket counter or by use of the self-service kiosks, which helps to alleviate long lines and improve customer service.

Employees

As of December 31, 2006, we employed approximately 7,700 employees representing approximately 7,400 full-time equivalents.

Both initial and recurrent training are provided for all employee groups. The average training period for new employees ranges from approximately one to eight weeks depending on job classification. Both pilot and mechanic training are provided by in-house training instructors.

Federal Aviation Administration (FAA) regulations require pilots to have commercial licenses with specific ratings for the aircraft to be flown, and to be medically certified as physically fit to fly. FAA and medical certifications are subject to periodic renewal requirements including recurrent training and recent flying experience. Mechanics, quality-control inspectors and flight dispatchers must be certificated and qualified for specific aircraft. Flight attendants must have initial and periodic competency training and qualification. Training programs are subject to approval and monitoring by the FAA. Management personnel directly involved in the supervision of flight operations, training, maintenance and aircraft inspection must also meet experience standards prescribed by FAA regulations. Management personnel attend management training classes to meet government mandated requirements as well as skills development training. All safety-sensitive employees are subject to pre-employment, random and post-accident drug testing.

We have employee groups that are represented by labor unions and are covered by collective bargaining agreements. The Railway Labor Act governs our relations with these labor organizations. The agreement with our dispatchers, who are represented by the Transport Workers Union (TWU), was ratified in October 2004 and becomes amendable in January 2009. Our agreement with our pilots, who are represented by the National Pilots Association (NPA), was ratified in August 2001 and became amendable in 2005. The agreement is currently in mediation under the auspices of the National Mediation Board.

We have four separate agreements with employee groups represented by the International Brotherhood of Teamsters (IBT). Our agreement with our maintenance technicians and inspectors was ratified in October 2005 and becomes amendable in October 2009. The agreement with our technical training instructors was ratified in March 2006 and becomes amendable in March 2011. The agreement with our stock clerks was ratified in June 2006 and becomes amendable in June 2011. Our agreement with our ground service mechanic employees was effective September 2006 and becomes amendable in September 2011.

We have a collective bargaining agreement with our flight attendants who are represented by the Association of Flight Attendants (AFA). Our agreement with the flight attendants was ratified in June 2005 and becomes amendable in December 2008. We also have many employees who are not represented by labor unions. Our customer service, ramp and reservations agents are not represented by labor unions and rejected unionization, for the third time, by a substantial margin in December 2005. We are unable to predict whether any of our non-union employee groups will elect to be represented by a labor union or become covered by a collective bargaining agreement in the future. The election of a bargaining representative could result in employee compensation and/or working condition demands that could impact operating performance and expenses.

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Fuel

Aircraft fuel is our largest expenditure and accounted for 36.5 percent, 32.4 percent and 24.8 percent of our 2006, 2005 and 2004 operating expenses, respectively. Increases in fuel prices or a shortage of supply could have a material adverse effect on our operations and operating results. We utilize fuel purchase contracts consisting of both fixed-price and cap arrangements. Fixed-price arrangements consist of an agreement to purchase defined quantities of aviation fuel from a third party supplier at defined prices. Cap arrangements consist of an agreement to purchase defined quantities of aviation fuel from a third party using pricing mechanisms that are designed to minimize our exposure to fuel price fluctuations. Approximately 44% of our fuel usage, as measured in gallons, was purchased using either fixed price or cap arrangements during 2006. In addition, during 2007, the Company began using hedge agreements with a non-supplier third party to partially mitigate the impact of fluctuating jet fuel prices.

Subject to market conditions, we may implement fare increases to offset increases in the price of fuel. Due to competitive pressures, the airline industry has frequently been unable to pass on such fuel price increases through higher fares. There can be no assurance that any such fare increases will completely offset the effect of higher fuel costs or not adversely impact our competitive position. The impacts of high fuel prices have been mitigated somewhat by the addition of new, fuel-efficient B717 and B737 aircraft which consume significantly less fuel than the aircraft that have been replaced. In September 2005, we began installing winglets on a number of our B737’s which further improves their fuel efficiency. While we believe the fuel efficiency of our fleet offers us an advantage over many of our competitors who operate less fuel-efficient aircraft, increases in fuel costs which are not offset by our fuel purchase arrangements or fare increases will have an adverse effect on our future operating margins.

Maintenance, Repairs and Training

As of February 1, 2007, our operating fleet consisted of 87 B717’s and 41 B737’s having a weighted-average age of approximately three years. Our B737 airframes and engines are under warranty for a minimum of three years from the date of delivery. We believe the long-term estimated cost of maintenance to fly our aircraft will be within industry norms. We will be required to comply with new FAA regulations or Airworthiness Directives that may be promulgated in the future however; there can be no assurance that we will not encounter unexpected maintenance expenses or that our maintenance expense will remain within industry norms.

Aircraft airframe maintenance and repair consists of routine and non-routine daily maintenance and heavy maintenance checks. Routine and non-routine maintenance is performed in Atlanta, Orlando, Baltimore, Fort Lauderdale, Dallas and Tampa by our employees and by qualified third party contractors at the other cities we serve. Heavy maintenance is performed by qualified outside maintenance contractors. Maintenance repair costs for major components on our B717 and B737 aircraft, including engines and auxiliary power units (APUs) are covered under maintenance agreements with FAA approved contractors and are expensed as incurred. As new aircraft come out of their warranty period and as they age, maintenance costs tend to increase. They also increase as the maintenance, repair, and overhaul providers escalate their pricing. We expect maintenance costs to increase as aircraft come out of warranty but these increased costs will be partially offset by the addition of newly delivered aircraft into the fleet.

Our maintenance technicians undergo extensive initial and ongoing training to ensure the safety of our aircraft. The FAA recently awarded us with the Air Maintenance Technical Diamond Certificate of Excellence for Maintenance Training, the FAA’s highest maintenance award. This marks the eleventh consecutive year we have received this award for exceeding the required levels of safety training for our maintenance technicians.

Insurance

We carry customary levels of passenger liability insurance, aircraft insurance for aircraft loss or damage, war-risk insurance and other business insurance. We believe our insurance coverage in these areas is adequate. We are exposed to potential catastrophic losses that may be incurred in the event of an aircraft accident. Any such accident could involve not only repair or replacement of a damaged aircraft and its consequent temporary or permanent loss from service but also significant potential claims of injured passengers and others. We currently maintain liability insurance in amounts and of the type which we believe are consistent with industry practice. Although we currently believe our insurance coverage is adequate, there can be no assurance that the amount of such coverage will not be changed or that we will not be forced to bear substantial losses from accidents. Substantial claims resulting from an accident in excess of related insurance coverage or not covered by our insurance could have a material adverse effect on us.

Congress passed the Homeland Security Act of 2002, which mandated the federal government to provide third party, passenger, and hull war-risk insurance coverage to commercial carriers through August 31, 2003. Coverage under this Act has been extended and currently we have received certification of coverage through August 31, 2007.

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Airport Operations

Ground handling services, provided by third parties, typically are of two types: under-wing only and complete ground handling. Under-wing ground handling services include, but are not limited to, directing the aircraft into and out of the gate, baggage and mail loading and unloading, lavatory and water servicing, de-icing and certain other services. Complete ground handling consists of public contact and under-wing services combined.

Using AirTran employees we conduct complete ground handling services at 33 airports, including Atlanta. At other airports, the operations not conducted by our employees are contracted to other air carriers, ground handling companies or fixed base operators. We have employees at each of these cities to oversee our operations.

Government Regulations and Airline Industry Taxation

The airline industry is highly competitive, primarily due to the effects of the Airline Deregulation Act of 1978, which substantially eliminated government authority to regulate domestic routes and fares. Deregulation has increased the ability of airlines to compete with respect to destination, flight frequencies and fares. Nevertheless, the airline industry remains highly regulated in other aspects, as more fully described below.

DOT Oversight. Although the Airline Deregulation Act of 1978 abolished regulation of domestic routes and fares, the United States Department of Transportation (DOT) retains the authority to alter or amend any airline’s certificate or to revoke such certificate for intentional failure to comply with the terms and conditions of the certificate. In addition, the DOT has jurisdiction over international tariffs and pricing, international routes, computer reservation systems, and economic and consumer protection matters such as advertising, denied boarding compensation, smoking and codeshare arrangements and has the authority to impose civil penalties for violation of the United States Transportation Code or DOT regulations.

Aircraft Maintenance and Operations. We are subject to the jurisdiction of the FAA with respect to aircraft maintenance and operations, including equipment, dispatch, communications, training, flight personnel and other matters affecting air safety. In 2006, the FAA converted the oversight of AirTran to the ATOS (Aviation Transportation Oversight System) programs. The ATOS process assesses the safety of air carrier operating systems using system safety principles, safety attributes, risk management, and structured system engineering practices. ATOS utilizes structured, automated tools to develop a dynamic, flexible, air carrier-specific comprehensive surveillance plan (CSP). The air carrier assessment tool (ACAT) looks for indicators of risk in the air carrier’s systems. The results of ACAT determine the frequency of the inspections in AirTran’s CSP.

The FAA has the authority to issue new or additional regulations. To ensure compliance with its regulations, the FAA conducts regular safety audits and requires all airlines to obtain operating, airworthiness and other certificates, which are subject to suspension or revocation for cause.

We cannot predict the cost of compliance with all present and future rules and regulations and the effect of such compliance on our business, particularly our expansion plans and aircraft acquisition program.

Federal Aviation Taxes and Passenger Facility Charges. In 1997, a law was enacted imposing new aviation ticket taxes as part of larger tax legislation designed to balance the nation’s budget and provide targeted tax relief as well as fund air traffic control, other FAA programs and airport development. As enacted, these new taxes will be imposed through September 30, 2007. Currently, the federal excise tax on tickets is 7.5 percent of the base fare with a segment fee of $3.30 per passenger enplanement, up to $6.60 each way or $13.20 per round trip. Beginning in January 2007, the segment fee was increased to $3.40 per passenger enplanement up to $6.80 each way or $13.60 per round trip.

During 1990, Congress enacted legislation to permit airport authorities, with prior approval from the DOT, to impose passenger facility charges as a means of funding local airport projects. These charges, which are intended to be collected by the airlines from their passengers, range from $3.00 to $4.50 per enplanement up to $18 per round trip.

Fuel Taxes. We pay federal, state, and other taxes on fuel. We paid approximately $46.2 million, $41.4 million, and $28.8 million in fuel taxes during 2006, 2005 and 2004, respectively.

Security and Safety Measures. The Aviation and Transportation Security Act, was enacted in November 2001 and federalized substantially all aspects of civil aviation security and required, among other things, the creation of the Transportation Security Administration, or the TSA, to oversee all aviation security and the implementation of certain security measures by airlines and airports, such as the requirement that all passenger bags be screened for explosives. Funding for airline and airport security under the law is partially provided by a per enplanement ticket tax of up to $5.00 each way or $10.00 per round trip, with authority granted to the TSA to impose additional fees on the air carriers if necessary to cover additional federal aviation security costs. The security tax is

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currently $2.50 per enplaned passenger each way and has been imposed since February 18, 2002, the date the TSA began taking responsibility for airport security. Pursuant to its authority, the TSA may revise the way it assesses this fee, which could result in increased costs for us. We cannot forecast what additional security and safety requirements may be imposed in the future or the costs or revenue impact that would be associated with complying with such requirements.

Miscellaneous. All air carriers are subject to certain provisions of the Communications Act of 1934, as amended, because of their extensive use of radio and other communication facilities, and are required to obtain an aeronautical radio license from the Federal Communications Commission (FCC). To the extent we are subject to FCC requirements, we have taken and will continue to take all necessary steps to comply with those requirements.

Our labor relations are covered under Title II of the Railway Labor Act of 1926, as amended, and are subject to the jurisdiction of the National Mediation Board. During a period of past fuel scarcity, air carrier access to jet fuel was subject to allocation regulations promulgated by the Department of Energy. We are also subject to state and local laws and regulations at locations where we operate and the regulations of various local authorities that operate the airports we serve. Our operations may become subject to additional federal regulatory requirements in the future.

All international service is subject to the regulatory requirements of the appropriate authorities of the other country involved. We currently operate scheduled international service to Grand Bahamas Island. To the extent we seek to provide additional international air transportation in the future, we will be required to obtain necessary authority from the DOT and the applicable foreign government.

Environmental Regulations. The Airport Noise and Capacity Act of 1990 (ANCA) generally recognizes the rights of airport operators with noise problems to implement local noise abatement programs so long as they do not interfere unreasonably with interstate or foreign commerce or the national air transportation system. The ANCA generally requires FAA approval of local noise restrictions on Stage 3 aircraft. While we have had sufficient scheduling flexibility to accommodate local noise restrictions imposed to date, our operations could be adversely affected if locally-imposed regulations become more restrictive or widespread.

The Environmental Protection Agency (EPA) regulates operations, including air carrier operations, which affect the quality of air in the United States. We believe the aircraft in our fleet meet all emission standards issued by the EPA.

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In addition to the risk factors set forth elsewhere in this annual report, including, without limitation, in Items 1, 7, 7a, and 9a, investors should carefully consider the following risk factors before making investment decisions regarding our securities.

AirTran has a significant amount of aircraft related fixed obligations that could impair its ability to make principal and interest payments on its debt obligations and lease payments on its lease obligations.

AirTran has significant obligations including debt and lease obligations related to aircraft purchase commitments, aircraft delivery obligations and aircraft leases, debt and lease obligations for operating facilities, including existing facilities and planned new facilities, and other cash obligations including future funding obligations for other potential acquisitions. AirTran’s total indebtedness as of December 31, 2006 was approximately $811.1 million, of which $672.3 million was aircraft related.

During 2005, AirTran paid $93.5 million in aircraft pre-delivery deposits and was refunded $29.8 million in previously paid aircraft pre-delivery deposits. During 2006, AirTran paid $89.2 million in aircraft pre-delivery deposits and was refunded $102.8 million in previously paid aircraft pre-delivery deposits. Since January 1, 2006, AirTran’s total indebtedness has increased by $338.5 million to approximately $811.1 million as of December 31, 2006. The net increase in indebtedness was attributable to $451.6 million borrowed to finance B737 aircraft deliveries less $113.1 million of debt repayments. AirTran’s debt service obligations with respect to its existing or increased indebtedness could have an adverse impact on its earnings and cash flows for as long as the indebtedness is outstanding.

The ability of AirTran to make scheduled payments of principal and interest for its financing obligations depends on its future performance and financial results. These results are subject to general economic, financial, competitive, legislative, regulatory and other factors that are, to some extent, beyond the control of AirTran.

The amount of AirTran’s existing debt, its high level of fixed obligations, and potential increases in the amount of its debt and level of fixed obligations could have important consequences to investors and could:

As a result of the substantial fixed costs associated with the existing obligations of AirTran and which may be associated with future obligations of AirTran:

Certain existing AirTran indebtedness is secured by certain of its assets, which may limit the utility of such assets in obtaining additional financing.

Based upon current levels of operations and anticipated growth, AirTran expects to be able to generate sufficient cash flow to make all of the principal and interest payments when such payments are due under AirTran’s existing indebtedness, including the indenture governing AirTran’s existing notes, and any proposed indebtedness but there can be no assurance that AirTran will be able to repay

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such borrowings. However, the ability of AirTran to pay the fixed costs associated with its contractual obligations will depend on its operating performance and cash flow, which will in turn depend on general economic and political conditions. A failure to pay its fixed costs or a breach of its contractual obligations could result in a variety of adverse consequences, including the acceleration of its indebtedness, the withholding of credit card proceeds by one or more credit card processors, and the exercise of remedies of its creditors and lessors. In such a situation, it is unlikely that AirTran would be able to fulfill its obligations under or repay the accelerated indebtedness, make required lease payments or otherwise cover its fixed costs.

Covenants in AirTran’s existing debt instruments and potential future indebtedness could limit how AirTran conducts its business, which could affect its long-term growth potential. A failure by AirTran to comply with any of its existing or prospective restrictions could result in acceleration of AirTran’s existing or potential future debt. Were this to occur, AirTran might not have, or be able to obtain, sufficient cash to pay its accelerated indebtedness.

AirTran’s existing debt instruments and financing agreements contain covenants that, among other things, limit its ability to:

In connection with a potential acquisition of Midwest, the operating and financial restrictions and covenants in AirTran’s proposed credit facility to finance a portion of the consideration being offered in such transaction (the “Acquisition Credit Facility”) and potential assumed Midwest indebtedness may adversely affect AirTran’s ability to finance future operations or capital needs or to engage in new business activities. In connection with a potential acquisition of Midwest, the proposed credit agreement and assumed Midwest indebtedness would limit AirTran’s ability to, among other things:

AirTran’s proposed Acquisition Credit Facility would require AirTran to:

Further, unless amended, existing Midwest indebtedness may require AirTran to maintain certain cash levels.

For a description of the terms of the commitments for such proposed Acquisition Credit Facility, see the section captioned “The Offer – Source and Amount of Funds – Commitments” in the prospectus in the registration statement on Form S-4 and all amendments thereto filed with the SEC in connection with AirTran’s Exchange Offer. The failure of AirTran to comply with the covenants and restrictions contained in its indentures and other financing agreements could lead to a default under the terms of those agreements. AirTran cannot assure you that its future operating results will be sufficient to ensure compliance by it with any covenants in its proposed Acquisition Credit Facility or in any assumed Midwest indebtedness or to remedy any such default. In addition, in the event of an acceleration, AirTran may not have or be able to obtain sufficient funds to make any accelerated payments. If such a default occurs, all amounts borrowed and all amounts due under other instruments that contain provisions for cross-acceleration or cross-default due and payable could be triggered. If that occurs, AirTran may not be able to make payments on its debt, meet its working capital and capital expenditure requirements, or be able to find additional alternative financing on favorable or acceptable terms.

The liquidity of AirTran could be adversely impacted in the event one or more of its credit card processors were to impose holdbacks on payments due to the company from credit card transactions.

AirTran currently has agreements with organizations that process credit card transactions arising from purchases of air travel tickets by its customers utilizing American Express, Discover and MasterCard/VISA. Credit card processors have financial risk associated with tickets purchased for travel because, although the processor generally forwards the cash related to the purchase to AirTran soon after the purchase is completed, the air travel generally occurs after that time, and the processor would have liability if AirTran does not ultimately provide the air travel. Each of our agreements with the organizations that process American Express,

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Discover, and MasterCard/Visa transactions allows, under specified conditions, the credit card processor to retain cash that such processor otherwise would deliver to AirTran, i.e., a “holdback”. Generally, in all of AirTran’s agreements, the holdbacks can be imposed at the discretion of the processor upon the occurrence of specified events, including material adverse changes in its financial condition, or if the processor reasonably believes AirTran will be unable to perform its obligations. AirTran believes it currently has adequate levels of unrestricted cash and short-term investments that are sufficient to prevent the imposition of holdbacks under ordinary circumstances. As of December 31, 2006, AirTran was in compliance with its credit card agreements and it had holdbacks with only one processor, which holdbacks were in amounts that were not material to AirTran’s cash balances.

A majority of AirTran’s revenues relate to credit card transactions processed by the MasterCard/Visa processor. AirTran’s agreement with the MasterCard/Visa credit card processor contains covenants that permit the processor to holdback cash remittances to AirTran, if AirTran does not maintain aggregate prescribed levels of unrestricted cash and short-term investments; the processor determines that there has been a material adverse occurrence; or certain other events occur. The amount which the processor may be entitled to withhold varies over time and is equal to the estimated liability for future air travel purchased with Visa and MasterCard cards. As of December 31, 2006, AirTran was in compliance with the agreement and no remittances had been withheld. As of December 31, 2006, had such processor been entitled to withhold future remittances, the amount of such withholding entitlement would have been up to $95 million.

In the event material holdbacks are imposed, the liquidity of AirTran in the form of unrestricted cash and short-term investment assets would be reduced by the amount of the holdbacks. AirTran believes it has, and will continue to have, alternatives to address any requirement for holdbacks by such processors, including seeking to obtain letters of credit in lieu of accepting a holdback or providing a cash deposit.

AirTran’s agreement with its MasterCard/Visa processor expires March 31, 2008. AirTran’s other credit card processing agreements generally have no fixed term but are terminable without cause after 30 days’ notice and immediately upon the occurrence of various specified adverse events. The inability to enter into credit card processing agreements would have a material adverse effect on the business of AirTran. AirTran believes that it will be able to continue to renew its existing credit card processing agreements or will be able to enter into new credit card processing agreements with other processors, although it can not assure you that it will always have these options in the future should it seek to exercise them.

AirTran’s business is, and will continue to be, dependent on the availability and price of aircraft fuel.

Aircraft fuel is a significant expenditure and, as a percentage of AirTran’s operating expenses, accounted for 36.5 percent in 2006 and 32.4 percent, and 24.8 percent in 2005, and 2004, respectively. Due to the effect of economic events on the price and availability of oil, the future availability and cost of aircraft fuel cannot be predicted with any degree of certainty. Although AirTran is currently able to obtain adequate supplies of aircraft fuel, it is impossible to predict the future availability or price of aircraft fuel. Political disruptions or wars involving oil-producing countries, changes in government policy concerning the production, transportation or marketing of aircraft fuel, changes in aircraft fuel production capacity, environmental concerns and other unpredictable events may result in fuel supply shortages and additional fuel price increases in the future. For 2007, if jet fuel increased $1 per barrel, AirTran’s fuel expense, net of fuel contract arrangements, would increase approximately $9.3 million based on current and projected operations, without taking into account any potential acquired Midwest operations.

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AirTran’s operations are, and will continue to be, largely dependant upon the availability of fuel in the Gulf Coast area.

AirTran’s operations are largely concentrated in the Southeast United States with Atlanta being the highest volume fueling point in the AirTran system. In addition, over 70 percent of AirTran’s fuel contracts are based on prices of jet fuel produced in the Gulf Coast area. Any disruption to the oil production or refinery capacity in the Gulf Coast, as a result of weather or any other disaster could, among other potential effects, have a material adverse effect on the financial condition and results of operations of AirTran, not only in East Coast routes but across the network due to disruptions in supply of jet fuel, dramatic escalations in the costs of jet fuel, and/or the failure of fuel providers to perform under fixed-price fuel purchase agreements of AirTran.

We endeavor to manage and mitigate the risks of changes in aviation fuel prices, where we believe appropriate, by entering into hedging arrangements. We do not enter into fuel hedge contracts for speculative purposes.

To the extent we do not hedge our aviation fuel risk or correspondingly adjust our fare levels, fluctuations in the market prices of jet fuel will have the effect of reducing or increasing the amount of profit we earn or loss we incur. Conversely, by entering into hedging contracts, we may, in exchange for minimizing the risk of potential cost increases associated with aviation jet fuel costs, also thereby necessarily minimize the potential for additional gain associated with decreases in the price of such fuel. While we have generally been able to enter into hedging transactions when we have sought such arrangements, no assurances can be given that our ability to enter into such transactions will not adversely be affected in the future by (i) limited interest in the provision of hedging arrangements by financial or other institutions, and (ii) the inability to procure hedging agreements as the result of some crisis (financial or other) associated with the supply of aviation fuel, political instability in oil producing countries or other developments which have otherwise affected the interest of financial or other institutions in entering into fuel hedging transactions in general. Likewise, we can not assure you that counter parties to hedging agreements will always perform. For a more detailed discussion of our current aviation fuel hedging activities, please see Item 7A "QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK – MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS – AVIATION FUEL.

AirTran’s business is dependent on technology. AirTran will continue to rely heavily on automated systems to operate its business. Any failure of these systems, or the failure to integrate them successfully with any acquired operations could harm the business of AirTran.

AirTran is increasingly dependent on technology initiatives to reduce costs and to maintain and enhance customer service in order to compete in the current business environment. AirTran depends on automated systems to operate its business, including computerized airline reservation systems, flight operations systems, telecommunication systems and websites. AirTran has made significant investments in its website technology and Bye-Pass ™ check-in kiosks, and related initiatives across the system. The performance and reliability of AirTran’s technology is critical to its ability to attract and retain customers and its ability to effectively compete.

Website and reservation systems must be able to accommodate a high volume of traffic and deliver important flight information. Substantial or repeated website, reservations systems or telecommunication systems failures could reduce the attractiveness of services and could cause customers to purchase tickets from another airline. Furthermore, AirTran may need to utilize the technology systems of any acquired entity from and to the extent AirTran’s existing systems are not immediately scalable or until any acquired operations can be fully integrated.

Any internal technology error or failure, or large scale external interruption in technology infrastructure on which AirTran is dependent, such as power, telecommunications or the Internet, may disrupt its technology network, result in the loss of data or the failure to capture data. Any individual, sustained or repeated failure of the technology of AirTran could impact its customer service and result in increased costs and expenses and generally harm the business of AirTran. Like all companies, AirTran’s technology systems may be vulnerable to a variety of sources of interruption due